Economist finds reasons for cautious optimism with rates in the 7s

“Even in a really tough market, we’re still getting 4 million annualized sales,” Kushi said. “I think that’s the life events we’re talking about. Even in a tough market, an affordability- and inventory-constrained market, you’re still seeing this sort of lower bound of 4 million sales. And that’s not nothing.”

Home prices are adjusting city by city. Some once-hot metros have slipped while others keep climbing.

“It’s not a house price crash, right? It’s been a gradual decline,” she said. “We’ve seen in places like Dallas, there’s been year-over-year price declines. A lot of the formerly pandemic darling markets are now seeing some house price moderation or declines. But then in Chicago, a top-performing market, 5 to 6% house price growth. But those price declines do help to bring affordability into better balance, even with higher or elevated rates.”

What could change

Kushi said volatility is very challenging for the market right now. Some of the jumps in mortgage rates over the past several weeks have been especially large compared with the last couple of years.

“You get the folks that say, ‘Well, mortgage rates are actually at historical averages,’ which is true,” she said. “A rate from 7.5% to 8% is the pre-pandemic historical average for the 30-year fixed rate, but it’s not the level, right? It’s the change. So the change we had in 2022 was very rapid, and nowadays it’s the rate lock-in effect and whether it gets worse or it gets better, right? But I think what we’re all looking for is stability and predictability, so that buyers and sellers can plan.”